Continuing its agenda to simplify the foreign exchange regime, the Reserve bank of India (RBI) today said it intended to allow exporters and importers to write contracts giving them the right, but no obligation, to sell an specified amount of foreign currency for a specific price at specific time to banks. They will also be able to earn premium income from these transactions.

At present, importers and exporters can buy and sell options simultaneously on a zero-cost structure, which means they do not earn premium income.

RBI is seeking comments on proposals for over-the-counter foreign exchange derivatives and hedging commodity price risk and freight risk by December 15.Satyajit Kanjilal, chief executive of treasury risk management consultancy outfit Forexserve said draft norms indicated that banks would no longer be able to issue exotic currency contracts. RBI intends to plug this loophole, which banks allegedly used by selling exotic foreign currency contracts.

There may not be any material change in the volume of such structures as it was similar to selling a forward contract with an underlying, said a forex desk head with large private bank.

Central bank has also proposed to allow banks to offer plain vanilla cross-currency options to Indian residents who transform a rupee liability into foreign currency liability.